Circuit City's Job Cuts Backfiring, Analysts Say

wahington post ^ | 5-2-07 | Amy Joyce

[Hydroshock]

Circuit City fired 3,400 of its highest-paid store employees in March, saying it needed to hire cheaper workers to shore up its bottom line. Now, the Richmond electronics retailer says it expects to post a first-quarter loss next month, and analysts are blaming the job cuts.

The company, which on Monday also revised its outlook for the first half of its fiscal year ending Feb. 29, 2008, cited poor sales of large flat-panel and projection televisions. Analysts said Circuit City had cast off some of its most experienced and successful people and was losing business to competitors who have better-trained employees.

Circuit City expects to report a loss for the first quarter because of poor sales of expensive televisions, which often require experienced salespeople. (By Steve Helber -- Associated Press)

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"I think even though sales were soft in March, this is clearly why April sales were worse. They were replaced with less knowledgeable associates," said Tim Allen, an analyst with Jefferies & Co.

In particular, the televisions showing disappointing results are "intensive sales" requiring more informed employees, Allen said. "It's a big-ticket purchase for somebody. And if they feel like they're not getting the right advice or are being misled by someone who doesn't know, it would be definitely frustrating. They will take their business elsewhere."

Circuit City said in March that sales would be volatile for the next several months as the company adjusts to the changes. But yesterday the company said it was too early to tell whether the dismissals had caused any of the falloff in April sales b

[Salamander]

“God, I miss those days.”

Start a daycare business and take the little tykes shopping with you....:)

[Pharmboy]

I feel bad for the employees, but I always liked Best Buy better anyway.

[blam]

"Sears did the same thing in the ‘70s. Shot themselves in the foot."

My brother says the same was done at Home Depot.

[TChris]

Important business principle: You cannot cost-cut your way into prosperity. Set about making money, not saving it.

[Clemenza]

Duh. You get rid of those who are already trained and are strong performers, yet now find you have to spend time and financial resources training all the green newbies.

Who's running Circuit City? He/she/they really need to go back to Corporate Management 101, as (believe it or not, populists) this is what they tell you NOT to do in B-School.

[Canali]

Circuit City has 38% greater SG&A expense as a % of sales compared to Best Buy.

That’s why they did what they did.

CC was 21.2% last quarter.
BBY was 15.3% last quarter.

[jwpjr]

I purchased one of their worthless top-of-the-line warranties on a $3,000 laptop computer. I was assured by the salesperson that the warranty covered everything short of an act of war. Wrong. It was no where near what the salesperson had described.

They refused to even send the laptop in for repair at my cost. I would support criminal charges against them, but frankly I think the economic consequences of their poor business practices are going to be more effective!

I will never shop there again. Period.

[snowsislander]

So you get rid of your most productive workers and wonder why things are not going so well.

That's a fine summary of a common business management practice.

What's truly amazing is the number of managers who still collect a paycheck (and often bonuses) after implementing it, since it is a recipe for disaster.

[laotzu]

Start a daycare business...

Instigating/advocating frenzied games of 'knock over the manequins' at the JC Penny, food fights at the grocery store, and barking like a pack of dogs at the mall Santa(a tradition we still observe); apparantly puts just a whole lot of parents off.

Go figure.

[flying Elvis]

I know how you feel. Nothing irritates me more than a bunch of employees who know absolutely nothing about the products. I went to purchase some shocks for my truck a while back and the salesperson brought out one shock. She did not know that there were four of them on a vehicle. One of her coworkers had to explain it to her.

[laotzu]

the salesperson brought out one shock

Just..just...damn!! Truly stunning.

[PAR35]

I was pushier than you were. I couldn't find anyone to help me, so I went to the checkout counter and asked them to page someone. The response, "There should be someone over there". My response, "Yes, there should, but there isn't. So would you page someone". They finally found someone to get the box I wanted to buy for $600 or so.

My next big ticket item is coming from Sams.

[Salamander]

Buncha sissies....;]

[Balding_Eagle]

He started as though something had struck him. "You're right," he finally said.

It sounds as though your friend may be overpaid.

[RushLake]

The low priced help can’t s#it on the customers as well as the high priced help can.

[Vision]

Every time I walk into a Circuit City some employee has rap blasting throughout the store.

[longtermmemmory]

Could also be the fact Circuit City is the most UNINVITING sales floor.

LOUD, Rap music blasting, buffoon employees who are too busy playing with the floor models to give customer service and are really there to babysit the store.

[Rb ver. 2.0]

[Moonman62]

Important business principle: You cannot cost-cut your way into prosperity. Set about making money, not saving it.

Was it Reagan or Rush that said no country ever taxed its way to prosperity?

[Oberon]

It sounds as though your friend may be overpaid.

Nah. He's making around fifty grand, but he'd make twice that in the private sector. He doesn't believe that, but I do. He's one of the most conscientious people I know. He'd make a good freeper, but not from work. Not like me. =]